National Grid promised investors today that its dividend would rise at least in line with inflation every year — just months after it complained that the industry’s new regulatory regime was riddled with “numerous errors” meaning it could not adequately invest in new infrastructure.

The country’s biggest energy distributor sees a new regime from industry watchdog Ofgem come into force on 1 April, covering the next eight years. Ofgem sets revenues for almost two-thirds of National Grid’s business, and forced it to cut almost £5 billion from its £33.5 billion spending plans. The company then claimed the plans lacked “the essential investments to provide safe, reliable networks”.

City analysts had warned that its dividend could be sliced as a result, but today National Grid’s chief executive Steve Holliday said it could afford the dividends “while enabling the group to sustain the strong balance sheet needed to fund the business.”

He added: “The board is confident that growth in assets, earnings and cash flows, supported by improving cash efficiency and an exposure to attractive regulatory markets should help the group to maintain strong, stable credit ratings and a consistent prudent level of gearing, while delivering attractive returns for shareholders.”

One City analyst said: “There was a lot of noise at the time, but National Grid wouldn’t have accepted the deal if it didn’t think it could grow the dividend. It has a lot of work on its hands — the investment is the equivalent of building two Olympics — and wants to reward investors.”